| Written May, 1998 |  |
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File B2-19 |
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Seasonal Cattle Price Patterns
John D. Lawrence, extension livestock economist, 515-294-6290, jdlaw@iastate.edu
Cattle prices, influenced by changes in cattle slaughter, supplies of other meat and poultry products, demands for cattle for feeding or grazing, and consumer demands for beef, vary over the course of a year. If these changes are repeated from year to year, there may be seasonal patterns of price changes that are somewhat consistent and predictable.
Seasonal price patterns may change some over time if there are changes in production technology, industry structure, or other factors that affect production or demand patterns. The price indexes in this report are based on the period from 1988 through 1997.
Seasonal price patterns
Two kinds of information are reflected in the seasonal price indexes presented here.
Price index
The first is an average price index for each month. This index shows the average relationship of prices in a particular month to the average for the year.
Variability range
The second type of information presented is a variability range that provides an indication of the reliability of the price index for a particular month. It is based on the variability of prices for a specified month during the years included in the index calculation. Specifically, points on the charts that are above or below a particular monthly index indicate the range where the index for that month could be expected to fall 68 percent of the time. The 68 percent range statistically represents the average plus or minus one standard deviation.
Use January of Figure 1 for example. The monthly index value is 1.02 and the range is $0.97 - $1.06, so the price in a particular year will likely fall in this range approximately 2/3 of the time. The smaller the variability factor (the closer the points are to the index value), the more reliable is the monthly index.
Patterns by type of cattle
The material below presents information on seasonal price patterns for various classes and types of cattle, as well as an indication of the reliability of these patterns from year to year. Different classes of cattle have somewhat different seasonal patterns of marketing and prices.
The figures in this report reflect the average monthly indexes, with the variability range indicated by points above and below the index values. Actual monthly index numbers and the variability factors are shown in Table 1.
Choice steers (1100-1300 Ibs.)
On average during the 1988-1997 period, prices trended up seasonally from January to March, then declined into the summer months as shown by Figure 1. Prices were lowest in July and highest in March. Prices were below the annual average June to October. They were close to the annual average in November, December, and May and above the average January to April.
Yearling steers (700-800 Ibs.)
On average, yearling steers show great seasonal variation during the 1988-1997 period as shown in Figure 2. Prices trended downward from January to April, then trended upward through August. Prices were highest in December and lowest in April. Prices were below the annual average February to June; and above the average in January, July, August, November, and December.
Steer calves (500-600 Ibs.)
During the 1988-1997 period, prices trended upward from January to March as shown in Figure 3. Steer calf prices were highest in March and lowest in October. Prices were below the annual average September to December. Prices were above the average February to August.
Cull cows
Cull cow prices vary greatly on average during the 1988-1997 period as shown in Figure 4. Prices trended upward from January to March and downward from March to June and again from August to November. Cull cow prices were highest in March and lowest in November. Prices were below the annual average in January and October to December. They were above the annual average February to September.
Forecasting cattle prices
The seasonal price index may also be used to forecast prices for the months ahead based on the historic relationship. To forecast a future month, divide the current month average price by the index for the current month and multiply this number by the index for the future month. For example, if May fed cattle prices average $75 per cwt., the forecast for August would be 75 / 1.01 x .97 = $72.03/cwt. Adjusting for the variability suggests that there is a 68 percent probability that the August monthly average price will fall between $75 and $69.
Probability of price changes
The actual pattern of short term price movements over time is another potentially useful guide to seasonal price changes. Information File Cattle Price Changes By Two-Week Periods summarizes information on average price changes of choice slaughter steers by two-week periods throughout the year. The number of years that prices increased and decreased provides an indication of the probability of particular short term price movements. The average percentage increase or decrease gives some idea of the possible magnitude of price changes. For example, the data indicates there is a fairly high probability that prices will increase from the first half of March to the last half of the month. But there's a low probability that prices will rise from the last half of April to the first half of May.
This information can be useful in making short term marketing decisions on cattle. It can help with decisions on whether to market a bit lighter than normal or to carry cattle an additional week or so before marketing.
Table 1. Price index variability by type of cattle |
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Jan. |
Feb. |
March |
April |
May |
June |
July |
Aug. |
Sept. |
Oct. |
Nov. |
Dec. |
Choice steers |
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|
Price index |
102 |
102 |
104 |
104 |
101 |
98 |
96 |
97 |
97 |
98 |
100 |
100 |
Variability |
4.5 |
4.5 |
4.5 |
5.5 |
5.0 |
2.5 |
1.5 |
3.0 |
4.5 |
5.0 |
5.0 |
4.5 |
700-800 Ib. steers |
|
|
|
|
|
|
|
|
|
|
|
|
Price index |
101 |
99 |
98 |
97 |
97 |
100 |
102 |
102 |
100 |
100 |
102 |
103 |
Variability |
6.0 |
5.0 |
4.5 |
4.5 |
4.0 |
3.5 |
3.5 |
2.5 |
3.5 |
3.0 |
4.0 |
5.0 |
500-600 Ib. steers |
|
|
|
|
|
|
|
|
|
|
|
|
Price index |
100 |
102 |
105 |
105 |
102 |
102 |
102 |
102 |
99 |
97 |
98 |
98 |
Variability |
8.5 |
8.5 |
8.0 |
7.0 |
5.0 |
4.5 |
5.0 |
4.0 |
4.0 |
4.0 |
6.0 |
7.0 |
Utility Cows |
|
|
|
|
|
|
|
|
|
|
|
|
Price index |
98 |
103 |
105 |
105 |
103 |
101 |
103 |
103 |
100 |
96 |
90 |
93 |
Variabilty |
7.5 |
5.5 |
2.5 |
5.0 |
5.5 |
6.0 |
5.5 |
2.0 |
3.5 |
5.0 |
5.0 |
6.5 |